Latest update on reports.
Here Commerz bank with their technical strategy and trade levels below.
Of all the charts, one of the most notable to me is the eurusd implied volatility chart. Volatility has halved in the last 18 months or so. This is interesting for financial speculators as low volatility in potentially explosive instruments presents all sorts of asymmetric trade opportunities. I don’t have an entry yet on this issue but low volatility should always encourage us to examine opportunities for speculative option positions if only as hedges for long positions. Extremely low volatility is the financial communities enemy. It allows higher leverage but it reduces margins and volumes from commercial players.
Here their multi asset market technical report:
And here the very well established weekly FX technical analysis report from MS “FX Pulse”:
A great report. They are maintaining their overweight US$ position and vs all comers it seems inc the Euro and GBP and SKE, CHF, & EM currencies.
They go to great lengths to offer a deflationary picture to us and one which, they forecast, will lead to more central bank action. This is the strong US$, strong bullion scenario I have alluded to but goes contrary to the weak US$, strong AUD and Bullion scenario the UBS technical analysis team forecast. Either way its hard to envisage a scenario, pre more central bank action, that leads to much higher equity prices.
Here CS Wealth Management with their weekly fundamental and technical analysis forecasts and levels:
They maintain a pretty bullish view of things and forecast the EM weakness ‘fallout’ will likely be in providing lower inflation for DM markets than currently forecast. They maintain a overweight US$ position. Their equity buy recommendations are overweight consumer staple stocks e.g Cocacola, Macdonalds, Nestle, etc. In view of the general bullishness on the DM economies and weakness in EM countries its a slightly strange one to recommend buying large global consumer staple equities but there we are.
Here below the outstanding Fitzpatrick, Citi weekly multi market technical analysis report inc forecasts and trade levels.
Its a great report as usual. He remains long the US$ and short the Euro from a technical perspective contrary to the USB recomemndation. (The market consensus is certainly long US$). This report was released lunch time Thursday so he could not know that we would not score the Vix above her 200dma trend line. This is supportive for equities as are the dow transports holding and semi conductors etc. (Playing into the CS recommendation to buy Intel).
His comments re the bullion are worthy of comment and note. Price is inconclusive as yet and the inverse correlation to the equities is obvious and may suggest weakness but the pair provided a positive correlation between 2003 to 2008, note, so would just remember this and not be too driven by the recent inverse. The distribution of price does indicate that in the near to medium term (within 3 months) gold now presents us with the high likely hood of a resumption of its secular bull market trend.
Here the report:
And here the JP team with their weekly FX report. They remain overweight US$ and positive the DX basket. In line with consensus they have moved to neutral on the GBP.
And here the JP US Equity team
Rather than go through the detail of a excellent report from JP here I’d like to provide a few comments.
We got a ‘sell off’ move and it was, at times, steep but it did not do the technical damage that I suspected it would. Market breadth was never damaged as the key sectors held their resistances and key sectors have bounced meaningfully and fairly convincingly, for now. The internals are good thus far. Momentum has been decent on the bounce. The vix did not break her weekly 200dma on the close. etc etc. I maintain that the “easy money” is gone, correct but this bull market is not dead yet. We are likely to see a higher high in US indexes soon although this corrective period may have longer run before we do. Multi instrument wise nothing to suggest a meaningful problem here yet. Ie credit is ok and currencies are ok, ems aside.
For my own book. I did indeed cover two thirds of my short hedges earlier this week and booked the gains thankfully. The corrective last few weeks have seen the account rise as short positions have added to cash whereas long defensive equities have generally been fine. I picked up an allocation to France Telecom, Total, Chevron and BP ((and euro oil producer index) having sold these positions in late December.
WTI is back over 100$ whereas Brent has spiked higher having formed a nice distributive price pattern now through Jan early Feb. The comparative chart between the underlying Brent (+ price momentum from a distributive base, at a high level) and the divergent (though at trend line support) euro oil producers provides a technical tactical entry. Whether she runs I have no idea but the risk reward merits the allocation so I allocate like a robot to this tactical trade. I like entries where you have great divergence between positively correlated instruments and the laggard is at trend support. (On average this generally creates a positive pay day event).
The Nasdaq has bounced very strongly as has the Nas100. Europe stock charts are generally less bullish than US alternatives and EM consumer demand weakness is likely to play into some euro stock charts inc the consumer luxury and possibly staples, in my view.
Fx wise is far more tricky, for now, in my view and i’ve gone very neutral for now until the ‘dust’ settles from the ECB news flow and the German constitutional court’s report from Friday. I’m waiting for clarity and that’s as much as I can meaningfully say here and now.
I remain long the bullion in terms of cash core allocation and recently added leverage as their are technical indications that there is solid distributive base formation of price within a super secular bull market for the bullion. (If only volatility was lower in the instrument to allow a lower risk profile for asymmetric trade entries).
Finally here JP Asia with their equity recommendations. (A decent bounce from Asian markets is likely to occur):
and here JP with a special report on the banks and their equity recommendations from within this key sector. The euro stoxx 600 finance sector has bounce nicely off her trend support. The euro sectors are likely to have a V shaped price move, in my view as there was serious and rapid moves down but the trend is intact and a reattempt on the highs should occur soon following some price discovery of support in the market. The US banks have bounced more strongly than their European neighbors and therefore look in better shape technically. (Deflation is dogging the eurozone as are the ECB bank stress tests later this year! Euro inflation data later this week note).
Here JP on the banks:
All the best
Rich